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Benefits of Short-Term Life Insurance Policy

A short-term plan is beneficial when you have immediate financial commitments. It provides you with benefits for a particular period against a fixed premium.

  • 3,881 Views | Updated on: May 10, 2024

Life is a journey, and the journey comes with both smooth and rough terrains. Such tough times, especially financial ones, demand reliable support. To help you in this journey and provide a financial cushion, life insurance comes to your rescue.

    Key takeaways

  • Short-term life insurance offers coverage for a short duration of time with a specific purpose.
  • The most significant distinction between short-term and long-term insurance is the length of the contract.
  • In case of the demise of the insured person, the sum insured is distributed to the nominee.
  • You should evaluate various plans and then make a decision and choose a plan which provides maximum coverage.

Life insurance not only supports you financially during challenging phases but also gives you peace of mind for future emergencies. This blog will guide you through short-term life insurance, one such option that will help you secure your family financially.

What is a Short-Term Life Insurance?

As the name suggests, short-term life insurance offers coverage for a short duration of time with a specific purpose. You can choose a short-term plan that covers you for 5 to 25 years to get benefits in case of any unfortunate event during the policy period. Most of the plans can be modified as per personal preferences and come with the option of renewal.

Features of Short-Term Life Insurance Plan

The most significant distinction between short-term and long-term insurance is the length of the contract. You can make a choice between the two, depending on your financial goals in life.

Here are a few features of a short-term life insurance plan:

Premium Amount

The amount of premium in short-term insurance can be modified based on a variety of circumstances such as earnings, disbursements, deaths, etc. However, long-term insurance has a fixed amount of premium, which cannot be modified anytime.

Policy Tenure

The policy period of such plans varies from a few days or months to a year. It is specially designed to provide coverage for a specific period of time. If you have budget constraints and you are not able to afford long-term insurance, then getting covered under a short-term policy is the best option.

Wide Variety

Short-term insurance offers a variety of plans. From opting for a plan for a specific purpose to covering your loved ones for a year, you have a good amount of options available. You must select a plan according to your coverage, needs, and finances.

Benefits of Short-Term Insurance Plans

A short-term plan is beneficial when you have immediate financial commitments. It protects the family from the sudden drain of wealth in the event of mishappenings within a limited period of time. Mentioned below are the advantages of short-term insurance:

Cheaper Premium

Rates for short-term insurance policies are comparatively lower than other types of life insurance available. It allows you to save money and get protected at the same time. The premium depends on the policy period and the sum assured.

Provides Financial Security

As most Indian households still have one breadwinner, short-term insurance assures financial security for the family in unfortunate events. It serves as an income substitute for a particular period of time.

Death Benefits for Nominee

In case of the demise of the insured person, the sum insured is distributed to the nominee. The assured sum can be received in a variety of ways like, lump sum payment, a portion of a lump sum, etc.

Add-ons

The additional rider benefits help you strengthen your insurance as it covers a wide range of topics, such as income benefits, premium waivers, etc. With some plans, you can even avail yourself of critical illness benefits.

Tax Benefits

The decision to buy life insurance is to protect the family from future uncertainties, but, along with this, it also provides tax benefits. The premium paid is exempted under Section 80C of the Income Tax Act.

Flexibility

Insurance requirements are very specific and need-based and hence provide flexibility. Short-term life insurance policies meet temporary demands such as financial protection during an adventurous trip or a life-risking job and help secure your financial dependency.

Factors To Consider Before Choosing an Insurance Provider

Choosing an insurance service provider is hard as there are plenty available in the market. To make your search easy, we have mentioned some points to consider before making any decision:

Claim Settlement Ratio (CSR)

The claim settlement ratio is the percentage of claims settled out of the total number of claims received. You must select a brand that has higher customer satisfaction reports along with high CSR. This ensures that the money you are spending on premiums will be beneficial at the time of an emergency.

Sum Assured

You should evaluate various plans and then make a decision and choose a plan which provides maximum coverage with a limited amount of premium. You should not fall into the trap of the lowest premium policy as it might provide limited coverage and may not be helpful at the time you need it the most.

Full Disclosure

The insurance provider should provide all the policy details and clear doubts of the customer without any complex process. You, as a customer, should read the policy document before making a buying decision, as it will make you aware of the benefits you are entitled to.

Premium

Premium is the amount you pay annually against the insurance provider’s coverage. You should compare the benefits you get with the amount of premium you pay for it. You must not select the policy which drains your money as a premium and provide limited benefits.

Final Thoughts

Emergencies do not knock on the door before arriving. It comes suddenly and shatters your health and finances. You cannot avoid such situations, but you can, of course, plan for them in advance.

Most households in India still have a single breadwinner, which makes it difficult for the family to survive tough situations. By choosing a good life insurance provider, you can safeguard your family from unfortunate events. You must decide wisely when selecting the service provider, as it affects the entire family.

- A Consumer Education Initiative series by Kotak Life

Amit Raje
Written By :
Amit Raje

Amit Raje is an experienced marketer who has worked in various Fintechs and leading Financial companies in India. With focused experience in Digital, Amit has pioneered multiple digital commerce in India. Now, close to two decades later, he is the vice president and head of the D2C business department. He masters the skill of strategic management, also being certified in it from IIMA. He has challenged his challenges and contributed his efforts in this journey of digital transformation.

Amit Raje
Reviewed By :
Prasad Pimple

Prasad Pimple has a decade-long experience in the Life insurance sector and as EVP, Kotak Life heads Digital Business. He is responsible for developing user friendly product journeys, creating consumer awareness and helping consumers in identifying need for life insurance solutions. He has 20+ years of experience in creating and building business verticals across Insurance, Telecom and Banking sectors

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